The sale of shares is part of the government’s long-term strategic vision and will enhance the value of LIC in the long term, said Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Assets Management (DIPAM), the nodal body for divestment.
“The current IPO is the first step in creating long-term value for LIC’s shareholders,” he said at a press conference on Wednesday. “This issue is the right size given the capital market environment and will not crowd out capital and money supply given current environmental constraints. The optimal size should provide strong demand and post-sale performance. . »
The IPO, which was originally scheduled to be completed in March, was delayed due to unfavorable market conditions following Russia’s invasion of Ukraine.
The size and valuation of the issue have been lowered – the government is diluting 3.5% of its stake against the 5% previously planned. The price range was set between ₹902 and ₹949 per share, valuing the company at around ₹6 lakh crore, up from ₹13 lakh crore seen in March.
Pandey, however, said the valuation will depend on how the market and investors value the shares when LIC goes public and it is not correct to say that it is lower than expected.
“The valuations are all estimates by comparing with publicly listed players like SBI Life or HDFC Life, or you can even compare with foreign companies like China Life or AIA. Ultimately, the market will set the price,” he said.
Certainly, at ₹949 per share, LIC will raise ₹21,000 crore, still making it the largest IPO in India, beating the ₹18,300 crore raised by Paytm last year. LIC obtained special permission from Sebi to reduce the dilution of the stake, as current rules state that a minimum dilution of 5% is required for companies valued at more than ₹1 lakh crore.
Pandey said the decision to list at current market conditions was made considering “market demand which includes a strong anchor book, stabilizing market conditions, reduced volatility, flows internal and financial performance of the company”.
The government expects retail investors to bid aggressively to grab a discount of ₹45 per share. There is a higher discount of ₹60 per share for policyholders. The minimum number of shares that may be offered is 15.